Fin paper
–TERM PAPER
Term Paper (i.e. a 2-3 person team “Stock Research Report” that comprises the following components and is 5-7 pages)
Business Description (10%)
Competitive Position (20%)
Investment Positives (20%)
Investment Risks (20%)
Price Objective & Valuation Methodology (20%)
Conclusion/Buy or Sell Recommendation (10%)
Please put your initials (i.e. DJK) citing who was the author of each respective section of the stock research report
BUSINESS DESCRIPTION (10% of grade)
Please include a pie chart depicting the sizes of the various business
Resources:
Company annual report
Company 10-K filing
Company Investor Relations website
COMPETITIVE POSITION (20% of grade)
What is the company’s respective industry market share of each line of business?
Is its market share growing or contracting and why?
RESOURCES .. Barron’s, Bloomberg, CNBC, Google Finance, Morningstar Direct, Mutual Fund Management Commentary on Holdings, S&P Industry Reports, ValueLine, Wall Street Journal, Zacks, Yahoo Finance
INVESTMENT POSTIVES (20% of grade)
Bullet point rationales… what are the positive attributes of your stock recommendation back it up by facts
Examples… new product introduction, niche market with growing market share, cost cutting initiative will grow operating margins
Resources .. Barron’s, Bloomberg, CNBC, Google Finance, Morningstar Direct, Mutual Fund Management Commentary on Holdings, S&P Industry Reports, ValueLine, Wall Street Journal, Zacks, Yahoo Finance
INVESTMENT RISKS (20% of grade)
Bullet point rationales… what risks are inherent in your stock recommendation
Examples… excessive debt, highly cyclical earnings, management turnover, loss of key contract
Resources … Barron’s, Bloomberg, CNBC, Google Finance, Morningstar Direct, Mutual Fund Management Commentary on Holdings, S&P Industry Reports, ValueLine, Wall Street Journal, Zacks, Yahoo Finance
PRICE OBJECTIVE & VALUATION METHODOLOGY (20% of grade)
Your price objective should be a function of your valuation methodology
Valuation Methodology Examples .. earnings multiple, cash flow multiple or dividend discount model
Bloomberg and Morningstar are good tools
CONSULT THE DAVIS CENTER FOR HELP
PRICE OBJECTIVE & VALUATION METHODOLOGY EXAMPLE
Hurdle Rate – 10%
If the stock price is $100 what is your price objective in Year 1 & 3?
Valuation Methodology – Earnings (PE) multiple
Assume “Mr. Market” is semi-efficient (use 3 year average PE multiple)
KEY QUESTION #1
What level of eps is necessary to justify your 1 & 3 year price targets?
KEY QUESTION #2
What are the primary assumptions that justify your eps estimates?
Sales growth, operating margins, interest expense, tax rate, shares outstanding
KEY QUESTION #3
What is your confidence level in your eps projections (i.e. 50%, 60%, 70%, 80% or 90%) for both time horizons?
CONCLUSION/RECOMMENDATION (10% of grade)